Deluxe Policy Had Limitations For Homeowners

Donald and Carol purchased a deluxe homeowners insurance policy from Allstate Insurance Co. The sales agent told them it was Allstate's best policy and it was renewed annually.

Several years later a heavy rainfall caused Donald and Carol's back yard to flood. The rear basement wall of their home collapsed, causing structural damage and loss of personal possessions.

When Donald and Carol filed their claim, they were told the policy excludes water damage caused by flood, surface water, waves, tidal water or overflow of any body of water, including water below the ground surface that flows, seeps or leaks through any part of the home.

Experts who examined the damage agree the increased pressure created by the water-saturated ground was the impetus for the collapse of the basement wall. Donald and Carol hired an expert who reported the loss was due to defective construction. But Allstate, pointing to another part of the deluxe homeowner's insurance policy, said latent construction defects are not covered.

Donald and Carol sued Allstate, alleging they purchased the best policy Allstate offers and it is unconscionable to deny this claim.

If you were the judge would you order Allstate to pay Donald and Carol's claim? The judge said no.

The terms of the insurance policy govern, but if there is ambiguity the policy must be interpreted against the company that wrote the policy, the judge said. But in this case, the policy is clear that it does not pay for water damage from below-surface water, which the experts for both sides agree caused this loss.

Donald and Carol's attempt to show the damage was caused by construction defects is admirable, the judge commented, but such damage also is clearly excluded from coverage by this policy.

As for the argument it would be unconscionable to deny coverage, the judge noted '' . . . claimed reliance on the agent's representation that this was Allstate's best policy and would cover most losses does not alter the effect of the policy exclusions. The contract governs . . .''